Hyatt soars on Mr & Mrs Smith, Taylor Swift and hotel sales

A massive transformation is underway at Hyatt, and it’s boosting the company — which is behind brands like Alila and Park Hyatt — into major profitability.

The company reported this week a hefty $522 million profit, riding high on recent real estate sales and strength across leisure, group and business travel. It’s more than just Wall Street success keeping things busy at the Chicago-based hotel giant, though.

Hyatt leaders this week touted various successes like growth of the newly integrated partial — and growing — portfolio of Mr & Mrs Smith luxury and boutique hotels. Further, the brand is riding high on swelling travel demand, in part due to the world’s most famous singer; it also could even take on another brand acquisition.

“While we expect year-over-year growth rates to moderate, we are significantly above pre-pandemic levels and are not seeing signs of consumers reducing their leisure travel,” Hyatt CEO Mark Hoplamazian said on a Thursday earnings call. “We remain focused on enhancing our network effect by expanding our offerings in new markets and across more price points for our guests and customers,” he later added.

One of the ways Hyatt is looking to expand its offerings is via Mr & Mrs Smith — the booking platform of luxury and boutique hotels Hyatt acquired last year. The first batch of more than 700 Mr & Mrs Smith hotels appeared on World of Hyatt earlier this month, just as Hyatt’s partnership with Small Luxury Hotels of the World entered its last days.

Hoplamazian emphasized that Mr & Mrs Smith will deliver more options for Hyatt customers and that many more hotels will enter the World of Hyatt ecosystem by year’s end.

“We now have more than twice the number of properties previously available through our alliance with Small Luxury Hotels with offerings in 25 additional countries and hundreds of new markets,” Hoplamazian said. “We expect to have approximately 1,000 Mr & Mrs Smith properties available through Hyatt channels and World of Hyatt by the end of this year.”

It appears Hyatt leaders think there are opportunities to bring these hotels into the brand fold even further.

Later in the call, Hoplamazian noted thousands of room nights have already been booked since the first batch of Mr & Mrs Smith hotels entered into the Hyatt orbit. There is significant traveler interest in Europe, where Mr & Mrs Smith has a major presence.

Hoplamazian said:

The vast majority are in Europe because that’s where the critical mass is for Mr & Mrs Smith, but I was surprised to see a number of U.S. markets in which there were very, very unique hotels in markets in which we are underrepresented or not represented. I think it’s very clear based on the hotel owner feedback in the Mr & Mrs Smith network that they are likewise very happy and maybe a bit surprised at the traction that we’ve gained already.

He later noted that some hotel owners in the Mr & Mrs Smith network might even decide to take on a deeper relationship with Hyatt — presumably indicating an opportunity to convert some of these independent hotels into established Hyatt brands.

Taylor Swift (and other factors) boost Hyatt

Hyatt kicked off the year with increasing demand across all three major travel types: leisure, business and group meetings/events.

Leisure travel revenue was up 7% for the first three months of this year, and all-inclusive demand in the Americas region is pacing for a 4% increase for the current quarter ending June 30. Group business was up 6% for the first three months of the year, while business travel demand was up 6%.

The wild figure out of all this is how worldwide business travel demand kicked off the current quarter at Hyatt: Global business travel demand was up 21% compared to a year ago. This is a sign even more travel demand is coming back to life, which will certainly push up hotel rates.

Hoplamazian also addressed the Taylor Swift of it all, too.

“Of course, we have to mention Taylor Swift, who continues to grow GDP for the world now,” he said. “So, she is having an effect on every market in which she shows up. I see a lot of data and a lot of data points, and I can’t remember when we’ve seen all three segments [leisure, business and group] going so well.”

What’s next for Hyatt

If you thought Hyatt was done adding brands to its network — after acquiring Apple Leisure Group’s all-inclusive resort network, Dream Hotel Group and Mr & Mrs Smith — you’re wrong.

Hyatt is in the middle of a transformation process where it behaves more like Hilton and Marriott; in other words, it doesn’t own many of its hotels and instead licenses to hotel owners the rights to use its brands. This “asset-light” strategy is why Hilton and Marriott tend to see significantly larger profits than competitors that own a lot of their own buildings.

Hyatt shed billions of dollars in real estate in recent years, including recent sales of a Hyatt Regency in Aruba, the Park Hyatt Zurich and the Hyatt Regency San Antonio Riverwalk. While the properties may no longer be under Hyatt ownership, they do remain under Hyatt’s oversight; each of the new owners continued the relationship with Hyatt by entering into management agreements with the company.

Moves like this enable Hyatt to focus less on day-to-day real estate ownership and instead pursue growth. This growth comes from beefing up its network with new brands and offerings that attract more customers to the loyalty system.

For example, Hoplamazian noted that while the average Dream Hotel Group customer fit the typical spending power profile of a Hyatt guest, they tended to be 20 years younger on average. Lindner Hotels also had a similar guest profile as Hyatt but brought significantly more reach into Germany than World of Hyatt previously had.

Expect more strategic, selective plays like this going forward — as long as it doesn’t mean getting back into the business of actually owning a lot of hotel real estate.

“With respect to what’s out there, yes, there are some brand opportunities,” Hoplamazian said. “They tend to be narrower, and so we are seeing some activity in that regard, but they’re going to be fewer and further between. It’s just not a very large universe of things that would make sense for us.”

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